At-will Employment Law California
The statutory presumption of at-will employment is codified in Labor Code section 2922 which provides in part:
"An employment, having no specified term, may be terminated at the will of either party on notice to the other." In Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 335, the California Supreme Court stated, "an at-will employment may be ended by either party 'at any time without cause,' for any or no reason, and subject to no procedure except the statutory requirement of notice."
The California Supreme Court further stated:
"While the statutory presumption of at-will employment is strong, it is subject to several limitations. For instance, as we have observed, 'the employment relationship is fundamentally contractual.' Thus, though Labor Code section 2922 prevails where the employer and employee have reached no other understanding, it does not overcome their 'fundamental . . . freedom of contract' to depart from at-will employment. The statute does not prevent the parties from agreeing to any limitation, otherwise lawful, on the employer's termination rights. One example of a contractual departure from at-will status is an agreement that the employee will be terminated only for 'good cause' in the sense of '"'a fair and honest cause or reason, regulated by good faith . . .'" , as opposed to one that is "trivial, capricious, unrelated to business needs or goals, or pretextual . . . ." ' But the parties are free to define their relationship, including the terms on which it can be ended, as they wish. The parties may reach any contrary understanding, otherwise lawful, 'concerning either the term of employment or the grounds or manner of termination.' " (Guz, supra, 24 Cal.4th at pp. 335-336.)
In Guz, supra, 24 Cal.4th at pages 336-337, the California Supreme Court explained: "The contractual understanding need not be express, but may be implied in fact, arising from the parties' conduct evidencing their actual mutual intent to create such enforceable limitations.
In Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, the Court identified several factors, apart from express terms, that may bear upon 'the existence and content of an . . . implied-in-fact agreement' placing limits on the employer's right to discharge an employee.
These factors might include '"the personnel policies or practices of the employer, the employee's longevity of service, actions or communications by the employer reflecting assurances of continued employment, and the practices of the industry in which the employee is engaged."'
Foley asserted that 'the totality of the circumstances' must be examined to determine whether the parties' conduct, considered in the context of surrounding circumstances, gave rise to an implied-in-fact contract limiting the employer's termination rights.
In Guz, supra, 24 Cal.4th 317, the parties had not entered into an express written agreement on the subject of whether the plaintiff's employment could be terminated at will or only for good cause. Thus, as discussed ante, the Supreme Court analyzed whether the statutory presumption of at-will employment had been rebutted by evidence showing the parties had impliedly agreed the plaintiff's employment could only be terminated for good cause. The Guz court nevertheless noted that "most cases applying California law, both pre- and post-Foley, have held that an at-will provision in an express written agreement, signed by the employee, cannot be overcome by proof of an implied contrary understanding." (Id. at p. 340, fn. 10.)
In Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389, the California Supreme Court observed that "a clear and unambiguous at-will provision in a written employment contract, signed by the employee, cannot be overcome by evidence of a prior or contemporaneous implied-in-fact contract requiring good cause for termination."